Central bank to auction two-year NCDs

By Amy Su / Staff reporter

The central bank yesterday said it will auction NT$10 billion (US$333.89 million) of two-year negotiable certificates of deposit (NCDs) on Friday, raising concerns that it may revise upward its benchmark interest rates in the near future.

It will be the first time the central bank issues NCDs of the same duration since July 2003, central bank data showed.

“We decided to issue the NCDs after various local banks suggested raising their asset allocation tools,” Tsai Chun-hsiung (蔡俊雄), director-general of the central bank’s department of banking, told a media briefing.

Data showed that the bank launched a rate-hiking cycle for four years in September 2003, after issuing NT$39 billion in two-year NCDs one-and-a-half months earlier, raising concerns that yesterday’s announcement indicated the possibility of further monetary tightening.

The central bank’s discount rate has remained at 1.875 percent for the eighth straight quarter. The bank is due to hold its next board meeting next month.

FOREIGN EXCHANGE

In related news, the nation’s foreign exchange reserves rose to their highest level in history last month, increasing by US$2.51 billion to US$409.12 billion, the central bank said yesterday.

The weak US dollar helped boost the conversion rate of assets in other currencies, with returns from foreign exchange reserves management also helping raise the reserves last month, the bank said in a statement.

MARKET VALUE

The market value of securities and New Taiwan dollar deposits held by foreign portfolio investors at the end of last month totaled US$229 billion, the equivalent of 56 percent of foreign exchange reserves, the statement said.